Investments in Unit Trusts trend for the future – Senator Udoma

Senator Udoma Udo Udoma

Unit Trusts and Collective Investment schemes are the wave of the future for the capital market, according to the Chairman of the Nigerian Securities and Exchange Commission (SEC).

Senator Udoma Udo Udoma says such investment instruments have a more balanced portfolio for protection against massive loss, acknowledging however that the schemes may not generate huge returns compared to a good single stock.

He notes that one of the avenues to protect investors against losing money on the stock market is to diversify investments and believes the professional management of unit trusts ensures investment risks are spread.

The SEC boss was presenting a paper on “Nigeria and the Capital Market” at a Financial and Economic Journalism Workshop in Lagos, organised by the Thomson Reuters Foundation.

“For a small investor, it is difficult for you to track the performance of a whole variety of stocks and if you buy only one, what if you've chosen the wrong one and it doesn't perform well? Whereas if you buy a share in a unit trust, that is handled by a professional manager, the manager has the time to track the performance of all the various stocks, and they can know when to sell and when to buy”, he later told Luv Fm's Kofi Adu Domfeh in an interview.

Senator Udoma bemoaned the excessive concentration of investments in financial assets, where over 60% of trading activities on the Nigerian Stock Exchange (NSE) are still in bank stocks.

He says the SEC has mapped out strategies to raise confidence level in the market, with the introduction of new products and also persuading unlisted public companies, especially in Oil & Gas and Telecommunication sector, as well as Small and Medium Enterprises to list their securities.

Meanwhile, Senator Udoma tells Luv Fm Nigeria and Ghana are at the forefront of arrangements for the establishment of a West African sub- regional stock exchange. He believes access to access to technology would make the process easier.

“First of all we want to start with cross-listing; Nigerian companies listing in Ghana and Ghanaian companies listing in Nigeria… and ultimately have a regional stock exchange”, he explained, alluding to the competitive trend in the world to reduce the number of exchanges.

The Nigerian Stock Exchange currently has 264 listed securities, with a market capitalization of about N10.33 trillion as at 31st December, 2010.

According to Senator Udoma, “the Nigerian economy is poised for take-off with the stability being provided by better elections”, adding that as the country builds a world class capital market, wealth will be created for many long-term investors.

Story by Kofi Adu Domfeh/Luv Fm/Ghana